Very few companies or individuals are able to donate their services gratis. Most general contractors (GC) and subcontractors need to show up on the clock and await payment. But a problem arises when there is too much delay between work performed and payment rendered.
According to research, annually, both GCs and subs lose around $64 billion when payments are not timely rendered. Statistics indicate that it is especially difficult for subs who are material- and labor-intensive when the lag between labor and payment averaged 51 days. Over 60% of subs declined bids on projects when it was iffy when the GC or property owner would pay for the labor costs.
Fewer than 40% of subs claim to be able to defray late payments with their own resources and funding. Most subs are left twisting in the wind when the money train slows to a crawl. GCs don’t have it much better but may have deeper pockets. Still, general contractors who stress or stiff their subcontractors face uphill battles appeasing future work partners.
Costs can rise precipitously when payments slow to a crawl. There is also the risk of material man’s liens against the property — or even complete shutdowns of the building projects. Some stalled projects never again get the gas to proceed, which can cripple smaller companies who have put forth significant funding or investments to float their capital to pay the workers.
It’s hard to determine sometimes whether it is better to fish or cut bait on a project. While there are many factors to consider, it can still be difficult to discern the best path forward. Seeking legal guidance at this juncture can provide clarity when determining how to best approach the matter.
